SaaS M&A Trends: What Every Founder Needs to Know This Year
The SaaS M&A market has shifted meaningfully from the exuberance of 2021. Multiples have compressed, deal volumes have declined from peak levels, and buyers have become more selective. Yet within this normalised environment, significant opportunities exist for founders with strong fundamentals and realistic expectations.
Understanding current market dynamics helps founders make better decisions about timing, positioning, and which buyers to pursue. The data tells a nuanced story: while headline metrics suggest caution, the underlying trends favour quality businesses that can demonstrate efficient growth and sustainable economics. For founders willing to invest in preparation, current conditions offer genuine opportunity.
The Market Recovery Story
SaaS valuations have stabilised after a significant correction. According to SaaS Capital analysis, while the median multiple is down roughly 60 per cent from its peak achieved in 2021, it has stabilised in the 6 to 7x range for public SaaS companies. Public SaaS valuations are expected to remain in their current band of 5.5x to 8x current run-rate ARR for the foreseeable future.
Private company valuations show similar patterns. Bootstrapped companies now trade at approximately 4.8x ARR, while equity-backed companies achieve approximately 5.3x. These multiples represent a meaningful premium over historical averages prior to the pandemic surge, even if they feel disappointing compared to 2021 peaks.
The stabilisation matters more than the decline from peak. Founders who anchored expectations to 2021 multiples must recalibrate, but those working from realistic baselines find a market that rewards quality and is willing to pay for it.
Fewer Deals, Bigger Cheques
The volume of technology deals has declined, but the value of those deals has increased. PwC's TMT M&A analysis shows that technology deal volumes decreased 11 per cent in the first half of 2025, yet deal values increased 15 per cent over the same period. This divergence reflects buyers being more selective while committing more capital to the opportunities they do pursue.
The same research found a 119 per cent increase in average deal size between 2023 and 2024. Dealmakers entered 2025 with greater optimism, focusing their attention and capital on fewer, larger transactions rather than spreading resources across many smaller deals.
For founders, this trend has important implications. Buyers are not absent from the market; they are being selective. Businesses that meet buyer criteria attract strong interest and competitive dynamics. Those that fall short of buyer thresholds may struggle to generate meaningful engagement regardless of how the process is run.
The bar has risen. Buyers can afford to be choosy when deal flow exceeds their capacity to pursue opportunities. Meeting that higher bar requires stronger fundamentals, cleaner financials, and more compelling growth stories than were necessary when capital was chasing every available asset.
Current Multiple Reality
Understanding where multiples actually sit helps founders calibrate expectations. The range is wider than many assume, with substantial premiums available for the right businesses.
Forvis Mazars data shows that year-to-date 2025 EBITDA multiples averaged 7.2x TEV/EBITDA across the mid-market. However, this average masks significant variation. Transactions in the $100 million to $250 million enterprise value range commanded approximately 10.0x, up from 8.5x in 2024. Companies with over $10 million in EBITDA traded at 8.1x, up from 7.7x the prior year.
For SaaS companies specifically, the premium for recurring revenue characteristics persists. SaaS Capital data confirms that bootstrapped SaaS companies trade at approximately 4.8x ARR, while equity-backed companies achieve approximately 5.3x. The gap between these benchmarks and the higher EBITDA multiples reflects different measurement bases rather than conflicting data.
The practical implication is that founders should understand which multiple basis applies to their business and how buyers in their target universe typically evaluate transactions. A high-growth SaaS company will be valued on revenue multiples; a profitable software business may be valued on EBITDA. Misalignment between founder expectations and buyer methodology creates negotiation friction that can derail otherwise viable transactions.
PE Hold Periods: Why Exits Are Slower
Private equity firms represent a significant portion of the buyer universe for SaaS companies. Their behaviour shapes market dynamics in ways founders should understand.
According to data tracked by S&P and Preqin, the median holding period for a private equity-backed company reached an all-time high of seven years in 2023. The average holding period was 6.1 years in 2024, reflecting continued extension from historical norms.
Extended hold periods affect the market in several ways. PE firms with portfolio companies approaching the end of typical hold periods face pressure to exit, potentially increasing supply of businesses for sale. At the same time, firms that acquired companies at elevated 2021 valuations may delay exits to avoid crystallising losses, reducing supply of certain asset types.
For founders considering PE buyers, hold period trends suggest that new investments are being made with longer time horizons. Buyers are less focused on quick flips and more interested in genuine value creation over extended periods. This favours businesses with sustainable growth trajectories over those dependent on financial engineering or multiple arbitrage.
The extended hold periods also mean that PE firms are more disciplined about entry valuations. Knowing they will hold an asset for six to seven years rather than three to four changes the calculus of what they can afford to pay and still generate acceptable returns.
What Buyers Are Paying Premium For
Not all SaaS businesses command equal attention. Buyers concentrate their interest and premium pricing on companies that demonstrate specific characteristics.
Efficient growth matters more than growth alone. Buyers have moved past the "growth at all costs" mentality that characterised earlier market cycles. They want to see that revenue growth comes with reasonable unit economics, sustainable customer acquisition costs, and a path to profitability. Companies that grow efficiently command premiums; those that grow by burning cash face skepticism.
Net revenue retention signals customer value. Companies with NRR above 110 per cent demonstrate that their products create genuine value for customers, who respond by expanding their usage over time. This organic expansion reduces the pressure on new customer acquisition and provides confidence in future revenue streams.
Predictable revenue beats project revenue. Subscription models with long contract terms, automatic renewals, and low churn rates are worth more than equivalent revenue from transactional or project-based sources. The certainty of recurring revenue reduces buyer risk and justifies higher multiples.
Scale creates options. Larger transactions attract more buyer interest and create more competitive dynamics. Forvis Mazars data showing $100 million to $250 million deals at 10.0x versus smaller deals at lower multiples reflects this dynamic. Buyers can deploy more capital into fewer transactions, and competition for quality larger assets drives pricing.
Management depth and operational maturity also matter. Buyers want to see that the business can continue performing after the founder transitions out. Companies with strong second-layer management, documented processes, and scalable systems command premiums over those dependent on founder involvement for daily operations.
Clean financials reduce friction and increase confidence. Companies with audited or reviewed financials, clear revenue recognition practices, and well-documented metrics move through due diligence faster and with fewer surprises. Buyers reward this clarity with both faster closes and better terms.
Timing Your Exit in This Market
The current environment offers genuine opportunity for founders who understand its dynamics. Several factors should inform timing decisions.
Market conditions are favourable compared to recent quarters. Multiples have stabilised, deal activity is recovering, and buyer sentiment has improved. Waiting for a return to 2021 peaks is likely to prove futile; the market has structurally reset to a more sustainable equilibrium.
Company trajectory matters more than market timing. Selling when your business demonstrates strong performance, improving metrics, and clear growth potential will produce better outcomes than trying to time market cycles. Buyers evaluate companies based on their specific characteristics, not abstract market conditions.
Preparation takes time. Exit readiness typically requires 12 to 24 months of preparation before going to market. Founders who want optionality in the next 18 to 24 months should begin preparing now, even if they have not made a definitive decision to sell.
Competitive dynamics require patience. Running a genuine competitive process takes six to nine months from engaging an advisor to signing a letter of intent. Founders who approach the market without adequate time often accept suboptimal terms because they lack alternatives.
The quality premium in today's market makes preparation particularly valuable. With buyers being more selective, the gap between well-prepared and unprepared sellers has widened. Founders who invest time in improving their metrics, cleaning up their financials, and building management depth before going to market capture meaningfully better outcomes than those who rush.
Personal readiness also deserves consideration. Selling a business is emotionally demanding and time-consuming. Founders who are not genuinely ready to sell often sabotage their own processes through indecision, excessive counter-demands, or inability to commit to closing. The best time to sell is when the business is performing well and the founder is mentally prepared for the transition.
If you want to understand how current market conditions might affect your specific situation and timing, we would welcome a confidential conversation about your options.